Savers who bought Royal Mail shares for the income they pay should sell
immediately, experts argue.

Investors who bought Royal Mail shares through the Government’s own subscription system – more than half of all successful buyers – will be able to sell their holdings or buy more shares for the first time today.

Those who bought shares via a stockbroker have been able to buy or sell since last Friday under conditional trading, which allows investors to buy and sell ahead of the official stock market listing. Investors who chose a stockbroker have had a two-day head start and have been able to sell their shares. Since Royal Mail began trading on Friday the shares have rocketed from their issue price of 330p to finish trading at 475p yesterday.

The Telegraph understands that around 55pc of the 690,000 people who received shares bought directly through the government website. This could lead to a fresh stampede of sellers in trading today as investors look to cash in on the strong share price rise.

Investors who bought Royal Mail shares for the income should sell their stakes, experts say. Before trading began on Friday, the appeal of the shares had largely been in the likely dividend stream, which seemed attractive at the price. But with the shares having soared in value, the income now looks less appealing by comparison with the instant capital gain available if you sell.

With the shares priced at 475p at the end of trading yesterday the yield works out at about 4.3pc, net of basic-rate tax, which is deducted at source. Before trading began on Friday the yield stood at 6.1pc, representing 20p a share. The yield is now on a par with income stalwarts such as Tesco or Vodafone – which, unlike Royal Mail, do not face a union battle and massive restructuring.

Alastair Gunn, manager of the Jupiter High Income fund, said: "Investors have made some good money but they now need to look at Royal Mail in the cold light of day. The shares were attractive at 330p but at 440p the risk/reward ratio is not so clear-cut."

Stephen Bailey, manager of the Liontrust Macro Equity Income fund, was more direct, saying that at more than 400p the shares seemed expensive.

"The big rise on the first day after floating was a function of supply and demand. The share allocation was not kind to institutions so they had to buy in heavily on the first day. When the stock properly lists on the main market [today] a number of index funds will have to buy, which will support the share price at its current level."

He said he would not buy until the shares were at least 10pc lower. That would price them at about 400p to 410p.

Chris Kitchenham, of stockbroker Walker Crips, said: "Royal Mail opened buoyantly and many investors took advantage and sold immediately, reflecting their disappointment at their low allocations. The pricing always looked a touch low, and the issue was always going to be oversubscribed, which is not surprising given the 6pc prospective yield."

Mr Kitchenham was more optimistic than many of his rivals. He added: "In the longer term Royal Mail's key growth market is parcels. The financials work well, with the current pension deficit being parked with the Government. In the longer term there are possible value unlocking opportunities in the freehold land portfolio.

"There are clouds. Strikes are possible and the company's privileged VAT position is being challenged in court, but fundamentally the income yield is good and the valuation is still not that racy."

Other experts were split. Brokers on Friday said sales outnumbered buys by 13 to one as small investors took profits – but there was certainly interest among big buyers too, who moved into the market to grow their positions.

Selling Royal Mail? The income gems to consider

Income-hungry investors wanting higher income than the 4.3pc on offer from Royal Mail now should look elsewhere. There are a number of stocks in the UK market which are paying out income streams at a higher rate.

Energy firms offer high income. Previous analysis by The Telegraph has shown that Centrica, yielding 4.7pc, is best placed out of the utilities to keep affording the dividends it pays – as long as Ed Miliband's price freeze plan is seen off.

Other alternatives for income seekers include National Grid (yielding 5.7pc) while Jason Hollands, of adviser Bestinvest, backed AstraZeneca and GlaxoSmithKline.

"Among individual stocks, two names that consistently pop up in the portfolios of most of the income managers we rate highly are pharma giants GlaxoSmithKline and AstraZeneca. GlaxoSmithKline is yielding an inflation-beating 5pc and AstraZeneca an eye-popping 5.7pc despite a decent level of dividend cover,” said Mr Hollands.

Russ Mould, research director at AJ Bell, picked British Sky Broadcasting (yielding 3.4pc), Legal & General and Rolls-Royce (1.8pc) as his three favourite income plays. Although British Sky Broadcasting and Rolls-Royce have lower yields than Royal Mail, Mr Mould said they will grow their dividend at a much faster pace.

“In each case we expect the dividend to grow and academic studies show dividend growth stocks provide capital appreciation, too, and often the best investment returns of all, especially once the dividends are reinvested each year,” said Mr Mould.